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Tax and Expenditure Limitations and the Fiscal Response of Local Government: Asymmetric Intra‐Local Fiscal Effects
Author(s) -
Mullins Daniel R.
Publication year - 2004
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.0275-1100.2004.00350.x
Subject(s) - local government , metropolitan area , revenue , economics , public economics , differential (mechanical device) , disadvantaged , public service , business , economic growth , finance , geography , political science , archaeology , aerospace engineering , engineering , law
This article empirically investigates the effects of introducing statewide measures to limit the ability of local jurisdictions to raise revenue or make expenditures. It does so in intervals of five years over a 25‐year period, using fiscal observations for 31,804 units of local government in 787 metropolitan counties across the contiguous United States. Specifically explored is the effect of tax and expenditure limitations on the variation in revenues and expenditures between general purpose governments and school districts within county areas. Rather than imposing a uniform constraint across jurisdictions, tax and expenditure limitations (TELs) are associated with increased variation across both general purpose and school district revenues and expenditures and, by implication, increased service differentials. Effects are found to be asymmetric, with increased variation greatest within counties comprising the urban core and those with relatively more disadvantaged populations. The implications are that TELs are most constraining on the ability of governments serving economically less prosperous and at risk populations to meet public service needs. Such differential effects are of more than questionable merit and are the result of the application of blunt instruments to what is often an undemonstrated need. The outcome impairs both the efficiency and responsiveness of the local public sector.